As Chair of the Assembly Consumer Affairs and Protection Committee, I am pleased to report the results of a very successful legislative session. Among my top priorities were protecting consumers from unscrupulous debt collection practices and improving and updating New York’s telemarketing law.
This year my Committee advanced several initiatives, including legislation that will require full and conspicuous disclosure of retail store return policies and a measure aimed at protecting consumers from deceptive automobile warranty solicitations.
I am very proud of these and many other accomplishments and will continue to pursue my goal of protecting consumers throughout all of New York State.
New York’s free trial offer law requires the clear and conspicuous disclosure of the terms of the offer. It also requires that consumers be given adequate notice of the deadline to cancel the free trial offer, but only when a credit card is used for the transaction. While many free trials involve the use of a credit card, many do not. If a consumer used another form of payment, including check, direct withdrawal, or in-store cash payment, adequate notice of the deadline to cancel was not required. To address this, Assemblywoman Pheffer introduced a new bill (A.4908) which was signed into law this year (Chap. 280). The new law will require anyone offering a free trial to notify consumers of the deadline to cancel the offer regardless of payment method.
Smart shoppers know that return policies can vary widely from store to store and that it is a good idea to understand a store’s return policy before making a purchase. New York law requires retailers to post their return policies. However, this law, which has remained unchanged since its enactment in 1977, has failed to keep pace with changes in the retail market. Many return policies are quite lengthy and can involve several restrictions and fees, such as restocking fees. As a result, consumer confusion regarding these policies has increased in recent years. Over the past four years, the Consumer Protection Board has fielded over 2,000 inquiries and complaints from consumers about retail store return policies.
That is why Assemblywoman Pheffer introduced legislation to ensure that New Yorkers are able to make more informed retail choices. Pheffer’s bill, A.7562, was passed by the Legislature and signed into law by the Governor. The new law (Chapter 278 of the Laws of 2009) will remove an exemption from the existing return disclosure law that allowed retailers to avoid the return policy requirement by providing cash refunds or credit to an account within twenty days of the purchase. It will also make a written copy of the store’s return policy available upon request and require a store’s return policy posting to include whether returns will be subject to any fees, including restocking fees.
During these tough economic times, many consumers are watching their amount of debt continue to rise. As a result, the debt collection and debt management industries are experiencing explosive growth. While many of these businesses are honest and ethical, there are some unscrupulous companies that practice abusive tactics. In 2008, consumer complaints received by the Federal Trade Commission regarding third-party debt collectors grew for the eleventh consecutive year. In addition, debt collection complaints topped the annual complaint list at the New York City Department of Consumer Affairs for the first time in the agency’s forty-year history. Complaints regarding debt management companies have also increased and several published reports have raised serious concerns about their practices.
To address these growing concerns, Assemblywoman Pheffer decided to hold a public hearing. On May 14th, Pheffer’s Consumer Committee, along with the Assembly Committees on Judiciary and Banks held a joint public hearing to examine consumer protection in the debt collection and debt management industries.
As a result of the information and testimony received at the hearing, the Assembly passed a package of legislation aimed at protecting consumers from unfair and deceptive debt collection practices. This package includes legislation that would ensure that consumers are aware of their rights under New York’s Fair Debt Collection Practices law and would require third-party debt collectors and debt buyers to be licensed by the Department of State. Unfortunately, these bills have not been acted on by the Senate.
Pheffer’s committee is also working on legislation that would update the existing law that regulates credit counselors and debt management companies, expanding the law to regulate debt settlement companies.
Are your debts piling up? Have you been contacted by a debt collection agency? Consumers with un-manageable debt should consider contacting creditors directly to negotiate a repayment plan or consulting an attorney about legal recourse. If these options fail to result in a satisfactory outcome, a debt management service provider may be the answer.
Consumers need to be extremely careful when considering this option and should be suspicious of any provider that makes over-the-top debt reduction claims (e.g. providers that promise to “cut your debt in half” or settle your debt for “pennies on the dollar”). Consumers should also be suspicious of hefty up-front fees, or pressure to provide financial account numbers before a written agreement to is sent for review. While providers go by various names, there are three main types of providers offering their services to New York consumers.
Credit Counseling Agencies / Debt Management Companies
Credit counseling agencies and debt management companies offer financial counseling and guidance to consumers with unmanageable debt. Based on the consumer’s situation, a credit counselor or debt manager may enroll the consumer in a debt management plan where more favorable repayment terms are negotiated with creditors on behalf of the consumer and monthly payments are made by the consumer to creditors. Under New York law, these entities must be not-for-profit, provide financial counseling, and be licensed by the State Banking Department. When considering a provider, be sure to check if they are licensed by visiting http://www.banking.state.ny.us/sibudget.htm, or calling the Department at: 1-877-BANK-NYS.
Debt settlement companies do not negotiate with creditors upfront and most companies do not provide financial counseling. Debt settlement companies instruct their clients to stop paying creditors and instead accumulate funds in a savings account that can later be used as a bargaining tool to convince creditors to “settle” the debt for a target percentage of the principal balance owed. During the period when the funds are accumulating, creditors may impose additional finance charges and delinquency fees and undertake aggressive collection efforts, which can result in judgments, wage garnishments, and frozen bank accounts. Furthermore, if a settlement cannot be reached or the consumer fails to complete the agreed upon plan, most settlement companies do not refund the fees paid, leaving the consumer in a worse financial situation than when they started the plan. Finally, keep in mind that only a small number of consumers who hire debt settlement companies benefit from doing so.
Debt negotiation companies offer to obtain interest rate reductions or other concessions from creditors in order to lower consumers’ monthly payments. Unlike other services, debt negotiation does not involve full repayment plans or lump sum settlements. These entities claim to work with creditors to make monthly payments more affordable. However, keep in mind that some debt negotiation companies charge significant up-front fees.
Before using a debt management service provider, be sure to research its standing with the Better Business Bureau and the State Attorney General’s Office.
Enhancing Telemarketing Protections
Despite the success of the “Do Not Call” law, the Consumer Protection Board continues to receive more complaints about telemarketing than any other business category. In recent years, telemarketers have begun using new technologies, including prerecorded “robocall” messages, which have been the subject of numerous complaints. The Board has also received complaints about telemarketing that involves “negative option features,” where a consumer is given a free product or service for a limited time. Many times, consumers are not adequately instructed on the need to cancel the product or service and they are often frustrated when they realize that they unknowingly signed onto a long term commitment.
To better protect consumers, Assemblywoman Pheffer introduced and the Assembly passed A.8839-A. This bill would give the Board the authority to enforce existing restrictions that prohibit telemarketers from calling consumers after 9:00 p.m. and before 8:00 a.m. It would also require telemarketers to provide the identity of the telemarketer and seller, the purpose of the call, and the identity and cost of the goods or services being offered. Finally, the bill would require telemarketers to disclose all terms and conditions related to offers that include a negative option feature. This bill is awaiting action in the Senate.
The Law On Unordered Goods
In order to boost sales, some companies ship unordered goods, then demand payment unless the goods are returned at the consumer’s expense. This marketing technique is restricted under state and federal law, which mandates that unordered goods may be treated as a free gift that does not have to be returned. These goods must be prominently marked: “THIS IS A GIFT. PAYMENT NOT REQUIRED FOR THIS ITEM.” This law does not apply to goods that are part of an existing membership or club, where you agree to receive goods at specified intervals.
Despite these protections, consumers continue to report receiving unordered goods. That is why Assemblywoman Pheffer sponsored and the Assembly passed A.8049, which would allow anyone adversely affected to bring legal action against a violator to recover up to $500 for each instance in which goods were sent in violation. The bill is awaiting action in the Senate.
Federal Credit Card Reform Enacted
After years of inaction in Congress, credit cardholders can look forward to several significant new protections. Achieving credit card reform has been a frustrating process due to a federal preemption, which prohibited State legislatures from cracking down on abusive practices. During the previous legislative session, Assemblywoman Pheffer’s Committee held a hearing on credit card practices and reported two resolutions, which the Assembly adopted, calling on Congress to enact comprehensive credit card reforms.
The Credit Card Accountability, Responsibility and Disclosure Act of 2009 will provide significant new protections for credit cardholders. The law requires card issuers to provide enhanced disclosures to cardholders, restricts the imposition of certain interest rate hikes and penalty fees, and limits the marketing of credit cards to young consumers. Key provisions of the new law include restricting credit card issuers’ ability to raise interest rates on existing balances; requiring card issuers to apply any amount paid over the minimum required payment to the balance with the highest interest rate; and prohibiting the imposition of over-the-limit fees unless the holder has authorized over-the-limit transactions. The law’s provisions will take effect on February 22, 2010.
Accurate Credit Reports: The Key to Maintaining Your Credit Score
As creditors tighten their purse strings, consumers affected by unexpected events are at greater risk of seeing their credit rating diminish. Since many lenders use credit scores as a means to determine an applicant’s creditworthiness, a low credit score can limit a consumer’s access to credit and increase the cost. While credit scoring varies among creditors, almost all are based on the information contained in your credit reports. That is why it is important to order your free annual credit reports and check them for accuracy. False negative information can have a significant effect on your credit score. To order a report, visit www.annualcreditreport.com or call 1-877-322-8228.